CME Group’s Bitcoin Futures Witness Spike in Institutional Interest

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An internal investors email sent to customers on February 19 indicates that the Chicago Mercantile Exchange (CME Group) has witnessed a surge in Bitcoin futures volume. Per the CME Group’s note, BTC-based futures volumes have reached a new record on Tuesday with 18,338 contracts traded, and the company asserts increased volumes may be due to the growing institutional interest.

In 2017, crypto derivatives kicked into high gear after the CME Group and Cboe introduced their Bitcoin futures products. The interest in these markets was initially high, but derivatives volumes on these exchanges started to decline a couple of months after. The summer of last year witnessed futures contracts from these exchanges rise again, and interest began to grow drastically. Futures volumes were lower in December, and spectators noticed some signs of backwardation that indicates derivatives predictions on BTC price are relatively lower than the prices on international spot exchanges. In 2019, however, prices went back to normal between futures and spot values and volumes increased last month.

“Futures products from traditionally regulated exchanges (CME and CBOE) represented 11.7% of the Bitcoin to USD futures market in January, up from 6.36% in December,” Cryptocompare’s January exchange research notes.

Data from Cryptocompare indicates that in January, the CME Group has recorded more volume than Cboe. However, non-traditional futures trading platforms stole the show. Based on the research, Bitflyer FX traded the most BTC derivatives products, having a $1.13 billion daily average transactional value. Moreover, the analysis shows the perpetual futures volume presented by Bitmex last month, which was approximately $665 million. As this month comes to an end, an internal email sent by CME Group to investors notes that February has seen an appreciable spike in interest.

“Yesterday [Feb 19] set a new record with 18,338 contracts traded,” the executive’s message elaborated. “This is equivalent to 91,690 bitcoin or $360 million.”

“Q1 2019 is off to a strong start, average daily volume (ADV) has improved to 4,630 contracts (23,150 equivalent bitcoin), up ~13% from Q4 2018 while open interest rose to 4,076 contracts, an improvement of 21.5% over Q4 2018,” the note continued.

Last Tuesday’s futures spike also occurred on Cboe’s exchange as the XBT futures daily market statistics display soaring 4,945 contracts. The investors note states that the volume increase in February stems from large open interest holders (LOIHs).

“Institutional interest has gradually risen and the number of LOIHs has been holding steady around 43 holders since November,” the CME Group representative noted. “A LOIH is an entity that holds at least 25 BTC contracts.”

Perpetual Bitcoin swaps and derivatives have displayed growth and spontaneous spikes in trading activity over the previous year. Traditional Bitcoin futures products are seemingly attracting institutional buyers while leveraged bets without certain expiration dates are seeing retail investors play the market. Although Ledger X, Cboe, and CME Group products are performing well, there is still a lot of work to do before they match the volumes executed via perpetual Bitcoin swap markets managed by Crypto Facilities, Bitmex, Bitfinex, Bitflyer, Okex, and Deribit.